The Saudi General Authority for Statistics recently published comprehensive data detailing the Kingdom’s economic performance for the last quarter of 2023. The information revealed a 0.8% decrease in real GDP, an outcome primarily driven by a significant 9% shrinkage in the oil industry. This decline was a consequence of the production reductions agreed upon in the OPEC+ deal. Despite the dip in the oil sector, the non-oil sector exhibited a robust expansion of 3.8%, showcasing an uptick in growth as the year concluded, particularly when juxtaposed with the growth figures from the preceding quarter.
Consumer spending witnessed an increase of 5.3% over the year, surpassing the 4.9% growth recorded in 2022. This surge is attributed to the rise in household incomes and the emergence of new spending avenues in the realms of entertainment and tourism. Conversely, investment spending also experienced growth at the same rate of 5.3%, yet this represented a notable deceleration from the 21.3% growth seen in the previous year. This slowdown comes as a surprise considering the active investment climate fostered by the Public Investment Fund and the increased capital expenditures by Aramco, the state-owned oil enterprise.
The release of this economic data does not significantly alter the anticipated projections for Saudi Arabia’s economy in 2024. Expectations lean towards a rebound in real GDP growth to approximately 1.5%, as the oil sector’s decline is poised to lessen and the non-oil sector’s growth is predicted to maintain its current momentum. However, there remains a degree of uncertainty, especially since OPEC+ has extended its production cuts into the second half of the year. This extension could potentially lead to a more pronounced contraction in the oil GDP which, in turn, might pull down the overall real GDP growth below the current forecast.